Comments on Day-Ahead Market Enhancements Configurable Parameters Implementation Working Group - Oct 21, 2025

1. Please provide a summary of your organization’s comments on the October 21, 2025 DAME Configurable parameters implementation working group discussion.

Comments on Day-Ahead Market Enhancements Configurable Parameters Implementation Working Group – Oct 21, 2025

Department of Market Monitoring

November 4, 2025

Summary

The Department of Market Monitoring (DMM) appreciates the opportunity to comment on the Day-Ahead Market Enhancements - Configurable Parameters Implementation Working Group.[1] DMM supports the ISO testing the sensitivity of the configurable parameters on market results prior to go-live, but recommends that any results using unrealistic market data be interpreted with caution.

The ISO’s analysis highlights the sensitivity of imbalance reserve procurement and cost to envelope multiplier values and imbalance reserve bids. For future analysis, DMM recommends the ISO analyze the impact of the envelope multiplier on battery performance in the real-time, provide additional information on the amount of available imbalance reserve capacity, and assess imbalance reserve (IR) procurement with an hourly time horizon. DMM understands that some of this analysis may not be possible until after go-live and continues to recommend the ISO gain actual operational experience before discussing changes to the $55 IR demand curve cap, IR bid cap, or 85% envelope multiplier.[2]

Comments

The ISO conducted sensitivity analysis of the 85% envelope multiplier and the $55 imbalance reserve (IR) bid cap. The envelope multiplier is a parameter included in state-of-charge constraints that track the state-of-charge impacts of ancillary service awards. This multiplier defines how much state-of-charge is reserved from a battery that receives an imbalance reserve award. DMM supported the ISO’s relatively high initial multiplier value of 85% as a conservative starting point, noting that if testing reveals that this value has detrimental impacts on the overall market, it may be appropriate to lower the multiplier.[3]

The ISO’s analysis presented in the working group meeting highlights the potential for higher multipliers to lead to less imbalance reserve up (IRU) awarded to battery resources, and higher IRU prices. DMM recommends that after go-live, the ISO consider assessing the real-time performance batteries awarded IRU under different multiplier values. The multiplier value should balance real-time deliverability of storage capacity without overly constraining IR supply.

While DMM supports a conservative starting point for go-live, DMM recommends additional analysis to determine how drastically the envelope multiplier affects the performance of batteries in real-time to ensure the 85% multiplier is not too restrictive and does not create inefficiently high IR prices.

The ISO also conducted sensitivity analysis of the $55 IR bid cap by analyzing the changes in IR procurement and IR prices depending on different sets of IR bid prices. Unsurprisingly, the analysis shows the IR prices increase with higher IR bids. As DMM has previously stated, any consideration of changes to the IR demand curve cap and bid cap should be discussed in a separate policy stakeholder initiative that provides data analysis that would support such a change, and recommends the ISO not propose any changes to the cap on the basis of pre-market testing.[4] 

Finally, DMM recommends the ISO conduct analysis to provide insight into whether the 30-minute time horizon is too restrictive. It would be useful to know the amount of uncleared IR bids in addition to the cleared IR capacity.[5] DMM requests that the ISO provide information on the available IR supply under the benchmark scenario. The ISO could also calculate a simplified system-wide residual supply index (RSI) for the IR supply (available within 30-minute ramp constraints from the base case energy schedules). In addition, DMM requests the ISO run the IR procurement with an hourly time horizon as opposed to a 30-minute one.

[1]  Day-Ahead Market Enhancements: Configurable Parameters Implementation Working Group, California ISO, October 21, 2025: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Day-Ahead-Market-Enhancements-Configurable-Parameters-Implementation-Working-Group-Oct-21-2025.pdf

[2]  Comments on Day-Ahead Market Enhancements Configurable Parameters Implementation Working Group – August 7, 2024, Department of Market Monitoring, September 4, 2024: https://www.caiso.com/documents/dmm-comments-on-dame-configurable-parameters-aug-07-2024-working-group-sep-04-2024.pdf

[3]  Ibid.

[4]  Ibid.

[5]  i.e., available eligible IR capacity within 30-minute ramp constraints from the base case energy dispatch in addition to the cleared IR capacity.

2. Please provide a summary of your organization’s comments regarding the Benchmark analysis: Day-Ahead market solution discussion.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

3. Please provide a summary of your organization’s comments regarding Sensitivity analysis: Envelope constraint factors discussion.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

4. Please provide a summary of your organization’s comments regarding the Sensitivity analysis: Imbalance Reserve prices discussion.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

5. Please provide any additional comments.

Please see the PDF attached below the final question for DMM's fully formatted complete set of comments. For the reader's convenience, the complete text of the comments is pasted in response to #1, but there may be some formatting errors.

1. Please provide a summary of your organization’s comments on the October 21, 2025 DAME Configurable parameters implementation working group discussion.

• • PG&E appreciated CAISO’s transparency and communication during this tuning effort. Session 4’s presentation was clear, informative, and a great start.    
• • PG&E recommends that CAISO simulates lower envelope constraint attenuation factors for storage during market simulations and in their own analytics before Parallel Operations.  
• • PG&E recommends expanding the analysis beyond a single day to represent more diverse market conditions. The benchmark day has a CAISO peak demand of only 34 GW. We believe this urges further analysis using broader datasets will help evaluate IR performance and pricing impacts under varied scenarios, including stressed market conditions. 
• • PG&E suggests prioritizing discussion of the more adjustable parameters (i.e., envelope constraint attenuation factors, deployment scenario percentages percentages) given the tight timeline.

2. Please provide a summary of your organization’s comments regarding the Benchmark analysis: Day-Ahead market solution discussion.

PG&E appreciates the communication and efforts CAISO is putting into this tuning effort.  We appreciate the detailed description of the base case and find it sufficiently aligned with the market simulation base case to serve as a starting point to be used as reference for market participants.

3. Please provide a summary of your organization’s comments regarding Sensitivity analysis: Envelope constraint factors discussion.

PG&E recommends that CAISO simulates lower envelope constraint attenuation factors during market simulations and in their own analytics before Parallel Operations. This analysis should assess the impacts of lower values and whether the current level of constraint on battery provision of Imbalance Reserve Upward (IRU) is necessary for the product’s intended function.

CAISO’s analysis shows that the envelope constraint attenuation factor significantly influences IRU pricing, resource mix, and procurement volumes (which is reduced when the demand curve sets the IRU price).  Therefore, the current 85% factor in all hours may lead to high customer costs for a product (i.e., IRU) whose value remains uncertain — especially given historical real-time energy is offered without IRU.  For example, page 33 of the presentation illustrates that in the base case (meant to represent a “typical” day), the total IRU costs would exceed $300,000 (there are clearly visible 10 hours in that day priced over $20, with over 1500 MWhs of cleared IRU), resulting in costs of over $100 million per year.

Lower values of the envelope factors could allow for significantly higher IRU awards per battery resource per day.  As an example, a 40% attenuation factor would allow a fully charged four-hour battery to provide ten hours of IRU awards per day. PG&E believes four-hour batteries would generally be able to bid in real time to support that level of award, while managing state of charge based on their real time bidding and scheduling.

4. Please provide a summary of your organization’s comments regarding the Sensitivity analysis: Imbalance Reserve prices discussion.

PG&E urges using broader dataset will help evaluate IR performance and pricing impacts under varied scenarios, including stressed market conditions. The benchmark day has a CAISO peak demand of only 34 GW. We believe this urges further analysis.

• Low IR Pricing: The example on page 42[1] shows that zero Marginal Congestion Costs (MCC), zero congestion, and assumes low IR bid —factors that are likely to drive low clearing prices. PG&E hopes a larger data set will help clarify how realistic these conditions are, particularly whether IR-awarded resources would be dispatched through uncongested paths and how IR bid values might change under tight supply conditions.  

• Interaction with Energy Pricing: PG&E believes a larger data set will help illuminate IR’s impact on energy pricing and its MCC components through upper and lower deployment scenarios. Additionally, we recommend analyzing real-time realizations of IR awards. Given the frequent deviation between day-ahead congestion estimates and actual real-time congestion, stakeholders—especially load-serving entities—need visibility into costs associated with “phantom congestion.” A sensitivity analysis is encouraged, focusing on deployment scenario setups by adjusting critical constraints and the parameters for anticipated realization of IR in rea-time.

[1] Available at: https://stakeholdercenter.caiso.com/InitiativeDocuments/Presentation-Day-Ahead-Market-Enhancements-Configurable-Parameters-Implementation-Working-Group-Oct-21-2025.pdf

5. Please provide any additional comments.

PG&E recommends expanding the analysis beyond a single day to capture IR performance and pricing under varied market conditions. While the Oct. 4 data provide an initial check on product functionality and market response, future studies should include different seasons and stressed scenarios—such as days with solar-driven shortages or high peak loads that could lead to elevated Imbalance Reserve Downwards (IRD) prices or under-procurement of IRU.  

We also suggest prioritizing discussion on adjustable parameters (i.e., envelope constraint multipliers, deployment scenario percentages) over the bid caps and default bid prices.

Finally, the current timeline may be too relaxed. There is still a lot of analysis left to do before we start parallel testing; and we’re not sure tuning is appropriate in parallel testing. We hope CAISO shares our urgency. 

1. Please provide a summary of your organization’s comments on the October 21, 2025 DAME Configurable parameters implementation working group discussion.

SCE appreciates the CAISO’s continued commitment to the accelerated timeline it agreed to following stakeholder feedback in the latter half of 2024.  Allowing stakeholders to start participating earlier than originally planned, in the “Basic Analysis in MAP-Stage” rather than just at the front-end of “Fine Tuning in Parallel Operations,” will support a more collaborative, if a bit messier, process that is necessary to ensure a successful implementation of DAME in 2026.

SCE believes that because of the concurrent implementation of DAME and EDAM, DAME’s success will ultimately determine the success of EDAM.  This is because the success of EDAM will be contingent on a more efficiently resourced electricity grid, one that has greater reliability at a lower cost.  DAME promises a more efficient way to address the procurement of flexible capacity and cover the uncertainty in forecasts of load and VER output which should support and improve reliability throughout the EDAM footprint.  However, SCE is concerned that the costs associated with the new DAME products are uncertain and could potentially overwhelm any potential reliability and diversity benefits that DAME and EDAM could produce.

It is incumbent on CAISO to ensure that the costs of the new products do not exceed the expected benefits and the importance of its work in analyzing the Configurable Parameters cannot be overstated.  Therefore, regular, clear, and direct communication with stakeholders is necessary and expected, and the CAISO needs to continue to improve this communication.  For example, while the Configurable Parameters analysis is intended to be separate from the Market Simulation, the Market Simulation is the foundation for any Configurable Parameters analysis, and therefore, it should have been crystal clear in the presentation which day the benchmark setup used.  This will allow stakeholders the opportunity to go in to Map Stage for that benchmark day and follow the examples in the presentation.

Additionally, these presentations should be much clearer on how the IR and RC bids are seeded by CAISO, if at all, in that benchmark day.  It will be very helpful for stakeholders to clearly understand why or why not the market outcomes are representative of future in-production outcomes.  This uncertainty will breed divergent views of the outcomes that will confuse the conversation and take the effort off track.  For example, on Oct 4, it appears that ~26,300 MW of IRU was awarded at around a weighted average of $25/kWh, more than $600,000 for the day; that is substantial. These types of totals, even if just ballpark figures, need to be among the metrics CAISO tracks and acknowledges in its analysis.

Further, the CAISO should explain how the Configurable Parameters analysis will address potential peak periods and stressed market conditions. The period of time allotted for market sim will not include peak periods and summer-stressed conditions. The period used for Parallel Operations will be likely even less stressful. The impact of potential “phantom” congestion occurring when the amounts of Imbalance Energy are included in the congestion analysis will be much greater during peak periods than on a fall day with load peaking at 34,000 MW. Similarly, the analysis presented showing how the envelope constraint parameters can impact the availability of Imbalance Reserves by limiting the ability of storage resources to provide Imbalance Reserves will also likely have significantly larger impacts during the summer months when peaks are significantly higher.

2. Please provide a summary of your organization’s comments regarding the Benchmark analysis: Day-Ahead market solution discussion.

SCE has certain questions about the data and analysis provided and would appreciate further clarification about the underlying data for the Base Case. This includes identifying the day from the market sim, how the bids were generated, especially for Imbalance Reserves, whether the Imbalance Reserves caused any congestion within each of the BAAs, and additional information about transfer capabilities.

• Slide 17:
  • The supply for PACW seems to decrease over the day are the bid ranges intended to represent types of generation or the aggregation of discrete bids?
  • Is the load for PACW artificially flat over the entire day, i.e., is this just placeholder demand?
• Slide 19-21:
  • For CAISO, is the level of IRU of 0 MW in HE7 correct?  Or, is there a functional error in the calculation of the IRU requirement as the next hour’s requirement jumps to 4,000 MW.  This seems to occur as well for IRD in HE19.
  • How does the CAISO view the correlations between IRU and IRD?  For example, in HE 18 the sum of IRU and IRD is close to 9,000MW (before any diversity benefits), is it likely that both products would concurrently have that much requirement?  Additionally, this amount represents nearly a third of the peak for the day of 34,000 MWs, intuitively, this seems excessive.
  • It appears that the biggest diversity benefit for PACW and PACE for IRD is HE 19, a time when the CAISO has zero IRD requirement – is it understood how that can be?
• Slides 24-26
  • The prices for the benchmark day for the three BAAs are very different with PACE and PACW between $10-15 and the CAISO is $38-$64 – Does this imply that there is at most periods binding Transfer System Constraints? Is that something that is expected to be a normal occurrence?
  • Are there any inferences that should be drawn from the outsize changes in load for PACE and PACW, at HE 19 and HE 7, respectively?
• Slides 27-28
  • The aggregate A/S values shown on Slide 18 do not correspond with the aggregated values on slides 27 and 28, is there a reason for that?
• Slides 33-38
  • In those hours where the Demand Curve set the price for IRU did the CAISO fail the RSE?
  • The prices for CAISO IRU for HE 1 to 6 show substantial volatility whereas the cleared MWs are quite consistent, were these bids seeded by the CAISO or is there a different driver?
  • The outcomes of the IRU and IRD awards and prices are generally not intuitive and it would be helpful for the CAISO to provide an explanation, at least generally, for these outcomes.
• Slide 39
  • Is the example on this slide supposed to represent the observed outcome at HE 8 for PACW for IRD or is it just a constructed example?  Slide 39 shows 102.5 MW clearing whereas slide 38 shows a cleared amount closer to 200 MW that utilizes the demand curve to set the price.
• Slide 40
  • If the DEB for IR is $55, and if all resources bid $55, but the demand curve sets a price at $30.44, would those awarded bids be eligible for Bid Cost Recovery?

3. Please provide a summary of your organization’s comments regarding Sensitivity analysis: Envelope constraint factors discussion.

The results provided seem intuitive for the Imbalance Reserve prices but clearly indicate how important this configurable parameter will be to the overall cost function. The difference in prices for IRU in some periods approaches and exceeds $30 MW. Further analysis on trade-offs between the enhanced reliability of high factor versus the additional costs needs to be undertaken and published.

SCE would also like the CAISO to ensure ratepayers that the same SOC constraints and envelope constraints will apply to storage resources in non-CAISO BAA as well as those in the CAISO BAA. This should include any self-scheduled ancillary service from the storage resources as submitted by the non-CAISO BAAs.

4. Please provide a summary of your organization’s comments regarding the Sensitivity analysis: Imbalance Reserve prices discussion.

SCE has number of questions and issues about this analysis. First, SCE is most concerned about the cleared prices. Even when all bid prices are set at $0, the clearing price in most periods of the day seems to be about $15. This is not intuitive, and stakeholders would benefit from additional explanations as to both the mechanism and reasoning.  Today, most CAISO customers already pay for the availability of these resources through Resource Adequacy contract requirements for Must Offer Obligations and paying $15 MW for that capacity to perform an already required function will burden customers with unnecessary costs.

SCE does not understand how the demand curve can set prices below $55 when bids are submitted at $55. As we asked in the workshop, would those resources be eligible for bid cost recovery?

SCE is also concerned with the significant differences in prices for the DAME products between the various BAAs. For IRU, at a $0 bid, the CAISO sees a typical price near $15, while PACE IRU price appears to be mostly below $5, and the PACW price hovers just above $0. Obviously, there is congestion on the interties, or these prices should be equal. If there is such strong intertie congestion, what does that indicate for the diversity benefit? For IRD, the CAISO value for the $0 bid is a price of $0 except for HE8 and HE18, but the price for PACE never dips below $15. The values for PACW IRD are $0 in some hours, but for much of the day are between $5 and $15. SCE believes that more analysis of these results is needed to determine the source of these discrepancies. Should these results be viewed as representative of most days? Are the optimizations working properly for both IRD and IRU?

5. Please provide any additional comments.

N/A

1. Please provide a summary of your organization’s comments on the October 21, 2025 DAME Configurable parameters implementation working group discussion.

The October 21^st working group discussion would have benefited from additional explanation for the CAISO’s selection of the data to be analyzed and a summary of the CAISO’s views concerning the representativeness of the outcomes observed.  It was difficult to evaluate even in ballpark terms how outcomes would have differed under different market conditions (e.g., high load versus low load conditions).  Given the magnitude of some of the simulated Imbalance Reserve requirements produced by the analysis, it will be crucial that the CAISO provide a clear comparison of the cost impacts versus reliability benefits of potential choices in establishing various parameters at EDAM start-up.

2. Please provide a summary of your organization’s comments regarding the Benchmark analysis: Day-Ahead market solution discussion.

The Six Cities have no comments on this topic at this time.

3. Please provide a summary of your organization’s comments regarding Sensitivity analysis: Envelope constraint factors discussion.

The Six Cities have no comments on this topic at this time.

4. Please provide a summary of your organization’s comments regarding the Sensitivity analysis: Imbalance Reserve prices discussion.

The Six Cities have no comments on this topic at this time.

5. Please provide any additional comments.

The Six Cities appreciate the CAISO’s efforts to provide transparency through the Configurable Parameters Implementation Working Group.  With the series of five monthly working group meetings that are scheduled between now and activation on May 1, 2026, the Six Cities encourage the CAISO to ensure that the CAISO is clearly presenting information in the working group meetings.  Although the Six Cities acknowledge that much of the information being discussed is intended for a technical audience of market participants, it is still important that the CAISO summarize the work on configurable parameters that is being done and the key conclusions that are demonstrated through the CAISO’s supporting analyses, so that all stakeholders can understand clearly what is being studied and what the implications are for market participants from a policy perspective and for purposes of preparing for the initial implementation of the EDAM and the Imbalance Reserves Products.  Alternatively, it may be helpful for the CAISO to provide a short monthly report providing an overview of this information in the form of a discussion paper.